President Donald Trump's trade war against China is being mislabeled as the two countries are merely engaged in a "trade skirmish," according to JPMorgan Chase & Co. (NYSE: JPM) CEO Jamie Dimon.

What Happened

A simple explanation exists for why the stock market is shrugging off Trump's trade war with China, Dimon told CNBC in an interview. The reality is the two countries aren't at war, and even under a worst-case scenario, the financial impact to consumers from Trump's new tariffs are minuscule when compared to the $20-million American GDP.

Why It's Important

The White House is right to raise trade concerns with China, although Dimon said he would have taken a different approach in doing so, as tariffs create uncertainty and risks erasing some of the positive benefits from tax and regulatory reform and other pro-business policies, he said.

What's Next

The "trade tit-for-tat" could expand into a full-blown trade war and involve more countries, Dimon — but China and the U.S. can find a resolution and put an end to the dispute. The bank executive said he "doesn't know" which scenario is more likely.

"We could raise tariffs more, we could add tariffs to more things, the Chinese can retaliate in other ways — and I don't think that's good, but it's not a devastating thing," Dimon concluded.